44. Notes to the segment report

The segment report is presented as an annex to the Notes to the consolidated financial statements.

The Group’s segment report is prepared in accordance with the provisions of IFRS 8 and requires reporting on the basis of the internal reports to the Executive Board for the purpose of controlling commercial activities. The segment performance indicator used is the internationally customary key figure of EBIT (earnings before interest and taxes), which serves to measure success in each segment and therefore aids internal control.

The accounting and valuation principles applied to internal reporting comply with the principles applied by the Group described in Note 6 “Accounting and valuation principles”.

In line with the Group’s reporting structure for management purposes and in accordance with the definition in IFRS 8, the following four independently organised and managed segments were identified:

Container

The Container segment pools the Group’s container handling operations. The Group’s services in this segment primarily consist of handling container ships and transferring containers to other carriers (e.g. rail, truck or feeder ship). HHLA operates three container terminals in Hamburg (Altenwerder, Burchardkai and Tollerort) and further container terminals in Odessa, Ukraine, in Tallinn, Estonia and in Trieste, Italy. The portfolio is rounded off by supplementary container services, such as maintenance and repairs provided by the subsidiary HCCR.

The Container segment mainly generates handling revenue generated at a point in time. After carrying out the handling service, the client has control over the container and there is a payment obligation for HHLA. It also generates rental income over time. Furthermore, individual HHLA customers have contractual rebate entitlements arising from income generated at a point in time.

Intermodal

As a core element of HHLA’s business model, which is vertically integrated along the transportation chain, the Intermodal segment provides a comprehensive seaport-hinterland – and increasingly continental – rail and truck network. The HHLA rail companies METRANS and Roland Spedition and the trucking firm CTD complete HHLA’s range of services in this field.

As transport income, the revenue of this segment is generated over time. The client benefits during the time the transportation service is provided. If the container does not reach the destination during the reporting period, the revenue is differentiated using the input method. There are also rebate obligations in respect of individual customers.

Logistics

The Logistics segment encompasses specialist handling services, digital business activities and consulting. Its service portfolio comprises stand-alone logistics services as well as entire process chains for the international procurement and distribution of merchandise. The segment also provides consulting and management services for clients in the international port and transport sectors. Business activities for process automation, digital or airborne logistics services, digital services and leasing services, particularly for the Intermodal segment, complete the portfolio.

The revenue generated from special handling services is classed as revenue generated at a point in time. As soon as the special handling service has been provided, the customer has control over the handled cargo and HHLA is entitled to claim payment. This segment also generates income over time, chiefly from consultancy and letting services. Immaterial rebate obligations apply in respect of individual customers.

Real Estate

This segment is equivalent to the Real Estate subgroup. Its business activities include services such as the development, letting and management of properties. These properties include real estate in the Speicherstadt historical warehouse district and on the northern banks of the river Elbe (fishmarket area). Furthermore, industrial logistics properties and land in and around the Port of Hamburg are managed by the Holding/Other division.

The revenue from this segment is rental income generated over time.

The Holding/Other division used for segment reporting does not represent an independent business segment under IFRS 8. However, it has been allocated to the segments within the Port Logistics subgroup in order to provide a complete and clear picture.

The structure of the Group makes it necessary to issue a large number of invoices for inter-segmental services. These predominantly relate to the use of real estate, IT services, administrative services, workshop services and staff provided by the holding company. As a rule, services are valued at cost price. Transfer prices may not exceed the market price of the service in question. If the company providing the service predominantly sells the relevant service on the market outside the Group, it may charge the market price, even if the cost price is lower.

The reconciliation of segment variables with the corresponding Group variables are as follows:

Revenue and earnings

The reconciliation of segment revenue with Group revenue includes the elimination of revenue between the segments and subgroups that must be consolidated.

The reconciliation of the segment variable EBIT to consolidated earnings before taxes (EBT) incorporates transactions between the segments and subgroups for which consolidation is mandatory, along with the proportion of companies accounted for using the equity method, net interest income and the other financial result.

Segment assets

The reconciliation of segment assets to Group assets incorporates not only items and financial investments for which consolidation is mandatory, but also claims arising from current and deferred income taxes and financial funds not assigned to segment assets.

Other segment information

The reconciliation to Group investments totalling € - 3,497 thousand (previous year: € - 66,545 thousand) eliminates the internal invoices for services to generate intangible assets between the segments (previous year: to transfer property, plant and equipment in the amount of € - 53,555 thousand and to generate intangible assets in the amount of € - 12,990 thousand).

In relation to the reconciliation of depreciation and amortisation amounting to € - 2,252 thousand (previous year: € - 1,949 thousand), the entire amount is attributable to the elimination of inter-company profits between the segments and the subgroups.

The reconciliation of non-cash items amounts to € - 73 thousand (previous year: € - 34 thousand).

Information on geographical regions

For information by region, the segment revenue and disclosures on non-current segment assets are broken down in accordance with the affiliates’ respective locations.

Information on key clients

Revenue of € 276,422 thousand (previous year: € 257,799 thousand) from a single client exceeds 10 % of Group revenue and relates to the Container and Intermodal segments.